Agricultural marketing cooperatives with direct selling: A cooperative–non-cooperative game

We build a theoretical model to study a market structure of a marketing cooperative with direct selling, in which many farmers are members of an agricultural marketing cooperative. They can sell their production either to the cooperative or on an oligopolistic local market. We show that the decision to sell to the cooperative induces an anti-competitive effect on the direct selling market. The cooperative facilitates collusion on the local market by making farmers softer competitors on that market. Conversely, direct selling may create a "healthy emulation" among farmers, leading to more production benefiting the cooperative.